In January we made some predictions for the travel and tourism sector in 2019. As we reach the half way point in the year we reflect on the first six months and consider what may still occur.
Jack be nimble
At the start of the year we considered the inflexibility of more traditional chartering models and how this structure may be to the detriment of those businesses in 2019. Clearly the headline to report is the continued woes of Thomas Cook and its decision to put first its airline, then subsequently its whole business on the market for sale. This ongoing tale should serve as a parable to other large operators. Thomas Cook saw a customer social media frenzy over upcoming bookings following Citigroup’s downgrade of their shares to 'sell'. Unfortunately, we’ve seen this kind of panic before, in which perceptions of decline become a self-fulfilling prophecy. Despite a brand’s best efforts to declare 'business as usual', consumers absorb the ongoing gloomy media coverage and turn it into a reality. It seems the more the consumer psyche is infiltrated by a brands saga, the more consumer trust in the stability of the business is undermined and brand equity erodes.
We have also seen the collapse of several businesses, most notably and surprisingly The Holiday Place. As announcements of hard times across the travel sector continue and the impact of Brexit delays cause a softening in demand, is this a sign of things to come? Or without the return of last summer’s heat wave will operators mop up in the shoulder period of summer as the late booking’s markets has a boom?
We highlighted the growth expectations in the solo market at the start of the year. With companies like Flash Pack, aimed at the Solo 30s and 40s market, increasing their market presence and digital marketers like Travelzoo running its Solo September campaign again this autumn, Solo travel continues to be a segment that a growing number aim to capitalise on. The data continues to show this is a growing trend and especially amongst female travellers.
Private equity investment in the travel sector was limited over the first six months of the year with uncertainty surrounding Brexit impacting the flow of attractive deal opportunities. The two notable platform travel deals in the UK this year – ECI Partners’ acquisition of The Travel Chapter and Bregal Freshstream’s investment in Away Resorts – have been secondary buy-outs, whereby one private equity firm acquires an asset from an existing private equity ownership. This suggests that there remains optimism from private equity firms around growth opportunities within the travel sector in the UK. Other UK-based investment firms have targeted bolt on acquisitions overseas as part of ambitious buy-and-build strategies where pricing and competition is not as aggressive. For example, Inflexion supported Reed and Mackay with the acquisition of Australian firm, Concierge Travel earlier this year. Fundraising within the UK private equity market has continued to flourish resulting in levels of dry powder continuing to break records and increasing appetite to deploy capital into high quality businesses. Look out for more travel deals being completed by private equity firms in the second half of 2019.
Is the party over?
It's been said before that Millennials have high expectations. We’re increasingly seeing that Millennials and GenZs want it all from their travel experiences and businesses are going to need to keep up and satisfy a growing list of expectations to tempt them to book with a travel company. A feeling of uniqueness and personalisation, sustainability, Insta’ worthy moments, local experiences and health consciousness plus an understanding of food provenance all featuring high on their agenda. Can operators continue to rise to this challenge and capture the increasing spending power of the next generations?
Hotels fight back
With Brexit concerns perhaps weighing on consumer sentiment, the staycation is one of the trending terms of the 2019 summer, A recent Barclays report found over 30 per cent plan to spend more holiday time in the UK than previous years. This coupled with the inbound impact of the weakened pound, points to a bumper summer for UK hoteliers and accommodation providers. Affordability, flexibility, reliability and authentic experiences however are increasingly important, and businesses must flex to better achieve required occupancy rates during those traditionally quieter periods. We have seen hoteliers such as Marriott move into the home rental space in the last year and we expect to see further blurring of the lines between the hotel sector and Airbnb type offerings moving forwards.